Page last updated at 14:16 GMT, Tuesday, 16 February 2010

MPs' second home profits 'should be surrendered'

Sir Ian Kennedy, chairman of the Independent Parliamentary Standards Authority
Sir Ian Kennedy said gains "courtesy of the taxpayer" should not be retained

MPs should not keep profits made on the sale of taxpayer-funded second homes, says Parliament's new expenses chief.

Sir Ian Kennedy told the Times profits should be "surrendered" - but it was up to HM Revenue and Customs to manage it.

He also said the tax authorities should decide how far back to go when calculating profits.

Some MPs have been accused of making tens of thousands of pounds after selling homes on which the taxpayer paid their mortgage interest.

Lib Dem leader Nick Clegg has repeatedly criticised the practice, saying it amounted to some MPs becoming "spivvy property speculators, trading up from one home to the next for personal profit".

Mr Clegg said he would support legislation to force MPs to pay back any profits they had made on the sale of subsidised second homes.

"The public will expect Gordon Brown and David Cameron to make a similar commitment," he said.

'Central question'

In the wake of the MPs' expenses scandal last year an independent inquiry said all claims for mortgage payments should be banned and instead MPs should rent second homes.

It said those who already owned second homes should be able to keep claiming for up to five years - but should have to give up any profits made from that point on - in November 2009.

The view Kelly took and we take is that gain ought to be surrendered because it is made courtesy of the taxpayer
Sir Ian Kennedy

There had been suggestions that Sir Ian - who is deciding which of the inquiry's recommendations to take forward - might seek to water down that proposal.

But he told the Times: "This is a central question for me. Gains made in that way should not be retained.

"The mechanism for doing it is the only question we have to decide.

He said he agreed with Sir Christopher Kelly - who chaired the independent inquiry: "The view Kelly took and we take is that that gain ought to be surrendered because it is made courtesy of the taxpayer."

However he said it would be up to HM Revenue and Customs to collect the money and decide how to manage it.

New system

And he said it might require Parliament to pass new legislation or rules, before the general election, to allow tax officials to do so.

Sir Christopher has said without "clawback" of profits it would be difficult to justify making transitional payments and said it could be enforced by making any further payments "conditional" on MPs agreeing to give up profits when they sell the property.

Sir Ian was selected to head the new Independent Parliamentary Standards Authority, which will run a new expenses system, by a committee of long-serving MPs.

He has been consulting on a range of proposals including stopping MPs employing relatives and ending large pay-offs to retiring MPs.

On Monday it announced that 2,703 people had responded to the consultation and the final details would be published by the end of March.

All MPs other than those representing seats in central London have previously been allowed to claim back mortgage interest payments on their second homes - up to about £24,000 a year - as well as other costs.

It allowed them to maintain a home near Parliament and one in their constituencies and they were allowed to keep any profits made when they sold the property on.

But when receipts were leaked showing how MPs had used the allowance, some were accused of "flipping" their second homes, refurbishing one at public expense before switching claims to another, and of making huge profits on sales.

Others were criticised for labelling a property as a "second home" for expenses purposes - but as their main home for tax purposes, allowing them to avoid paying capital gains tax when they were sold.

The system is being overhauled and a new one is expected to be in place by the start of the next Parliament.

In the interview Sir Ian also defended the £6.6m start-up cost of the new expenses body - six times as much as MPs have been ordered to repay after an audit of their second home claims.

Sir Ian told the Times there would be about 60 staff and the running costs would be below that of its predecessor, the Commons Fees Office.

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